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The last charge of the 112 Congress has taken place. With just hours before the session was set to close, the congress passed the bill that will now go to Obama’s desk for signature. Only in my most vindictive moments did I want us to go over the cliff. I wanted the average person who voted for the current President to face the economic damage first hand. If nothing else, the prospect of facing an additional $2,500 in taxes with the possibility of the AMT hitting them, they may have learned what happens when a tax happy spend happy administration gets in power.

As it is, we have very little to be happy about. The first, if not only, is the fact that the Bush Tax Cuts are now permanent for everyone earning less then $450,000. About time! Although now that they are permanent, watch the left begin calling them the Obama Tax Cuts – as if.

The other positive is that the AMT’s annual correction is also permanent. No more posturing on that one.

But there is a TON to hate. Taxes going up for anyone in this economy is only going to do more harm than good. And those taxes are on business and investors. Not to mention investment itself.

And the worst part? There wasn’t ANY spending cuts of meaning. Rather we have that battle in two months. Oh yeah, I forgot the third thing – no debt ceiling limit rise.

All that means is that we get to go through this all over again in a few short months.

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Through all the discussion surrounding the fiscal cliff negotiations we have heard the relentless drumbeat of an argument that during the surplus years of President Clinton, the tax rates were higher than they are now. If it worked then, they theory goes, it can work now.

Makes sense. Kinda.

But no one is asking for a return to the Clinton-era rates. They’re asking for a return to the Clinton-era tax rates for SOME, not all.

And, of course, the idea is only to revert to the Clinton-era revenue rates. Not the spending rates.

What if we went back to the spending of that Clinton era? Why, during 1999 the federal budget was $1,701 billion. Adjusted for inflation, that comes to $2,350 billion. And what is our expected revenue for 2012? About $2,468 billion.

In an interview broadcast Sunday, Obama told NBC’s “Meet the Press” that Republicans are responsible for the stalemate that brought lawmakers back to Capitol Hill on a Sunday afternoon.

“They say that the biggest priority is making sure that we deal with the deficit in a serious way. But the way they’re behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected,” Obama said. “That seems to be their only overriding, unifying theme,”

To be clear, there is only one party in these negotiations that have, as their entire offer, a single overriding theme. And that is the President himself. The President’s entire offer, the whole of it, consists of raising taxes on the wealthy.

And that’s it.

No spending cuts. No entitlement reforms. No talk about any effort to reduce the deficit or attack the debt.

Just tax the rich. And he knows that this isn’t going to address any of the problems we face, on the contrary – it will only make it worse.

But if that was the only aspect of Obama’s confusion, he could be forgiven. We know that he’s nothing more than a class warrior who hasn’t an inkling of a clue on anything economic. But he should know how bills make their way through Capital Hill:

Obama said the Senate should vote on legislation to make sure middle-class taxes are not raised and that 2 million people don’t lose unemployment benefits .

The Senate doesn’t initiate financial bills; the House does. And they have. Two of them. Both waiting for Reid and the democrats to take them up, amend them and vote on them. The pressure is squarely on the Senate right now. Not the republicans.

How is it that democrats can criticize the Bush tax cuts as hurting the middle class 10 years ago and then claim today that reverting to the rates before those tax rates went into affect would ALSO hurt the middle class?

How does a media allow this to happen?

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John Boehner has said that he’ll give House members 48 hours to get back to Washington. That means if he were to call them right now they wouldn’t get to their offices until Saturday. Which leaves 2 days to pass legislation.

And that’s if he agrees to pass the Senate version of the bill.

As it stands right now, I think that the problem is this:

The President will not budge on his demand that the tax rate on wealthy Americans goes up. That is a deal breaker for him.

The democrats will not agree to spending cuts other than defense.

The republicans will not raise the tax rate on anyone.

The fiscal cliff is made up of two parts. The first is the expiration of the Bush-era tax cuts. Because these rates were pushed through using reconciliation, they were set to expire in 2011. However, as part of a negotiation, the rates were extended for 1 year. This agreement will end December 31st at midnight. Failure to extend the Bush tax rates will result in a massive tax hike for every American.

The second part is the agreement made that will mandate budgetary cuts; spending cuts. Among the items set to be cut is the defense budget. This is seen to be unappealing to republicans.

A guilty pleasure of mine would be to see us go over this cliff in full. I want to see how American’s react to the tax hike that will impact them January 1. This would include the extraordinarily large impact of the AMT that would impact millions of Americans.

However, my sick sense of cosmic justice aside, I really am looking for a permanent extension to the Bush tax cuts. It not only is the right thing to do, but trying to raise the rates like Obama has been insisting is only a political ploy not meant to address any of the fiscal issues that we have right now. With the rates made permanent, the economy will be able to remove the uncertainty and move forward in recovery.

As for the cuts. I say let ’em come. The impact will be short-term dramatic. I suspect the economy will move into recession but it will be quick and short. However, the long term benefit of the cuts will reduce the size of government spending and allow the economy to grow more quickly than it otherwise might.

My desire aside I feel that the ball is in the Senate’s court. Financial bills originate in the House and move to the Senate for consideration. The Senate should pass the bill or amend it and return it to the House. Under Boenher, the House has passed two such bills that are simply waiting to be considered by Harry Reid. For whatever reason, Reid will not hear those bills and allow the Senate to act.

Right now, the delay in passing a bill is squarely on Harry Reid and the democrats.

I’m sure that most Americans don’t pay attention to the goings on in the same way that I do. Lot’s of people have a life, for example, and do fun things. Likewise I don’t hold out much hope that the average Joe is very informed, so, random interviews with random people kinda mean, well, not much in the way of solid policy advice.

But this is cute:

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I suspect that even pedestrian news watchers have heard of the fiscal cliff by now. I hold out very little hope, however, that even a basic understanding of what that means is had. Which, I suppose, is par for the course.

However, here on the hallowed pages of TarHeel Red, it means that the federal government has some decisions to make. We could, for example, go off the cliff. Some think that not such a bad idea. Me, for example. I think that taking the hard steps required to cut spending, even defense spending, are long past due. Sadly, I’m joined in this analysis by Hoard Dean. I’m suspicious of the twist of fate that cause him to agree with me; I’m afraid to discover which of us has made the mistake in calculus.

However, there are other courses to take. We could make permanent the Bush era tax cuts. For everybody. For some. We could take this opportunity to cut spending even more, maybe even in a REAL way that real Americans understand. For example, the local specialty beer shop around the corner sells individual bottles of goodness for $2 American. I like to stop in and buy a six-pack every other week. My spend is $24 a month.

But let’s say that I budget an increase, I want to not only buy those 2 six-packs a month, but I wanna add the full liter of specialty beer. I up my spend from 24 bucks to $31. But then….then, well, Obama wins the election and my financial adviser says that I should cut back, so I say, “Okay.” And instead of buying 12 beers a month I buy 14; an extra $4.

My man goes crazy, he’s out of his head crazy. He demands to know how I agreed to cut the amount of money I spend on beer and THEN expanded it. I tell him simple, “I had budgeted a $31 expenditure. I reduced it to $28. I cut out nearly 10%!”

Serious. Politicians, all of ’em, dem and repub, look us in the eye and say this with a straight face.

Anyway. The cliff.

Obama wants to raise the rate of taxation on the rich. And when he says that, he means the rate of federal income tax. He frames the question in terms of the federal income tax rate. So, I usually speak about the federal income tax rate. And this is what I say:

According to the CBO, in aggregate, the poorest 60% of us don’t pay a federal income tax. Worse, the top quintile, the wealthiest 20%, pay more than 94% of federal incomes taxes according to the most recent numbers in 2009.

When Obama claims that the rich don’t pay their fair share, he’s not making sense. The rich are paying dramatically more than their fair share. However, I have folks that disagree with me. And those that do point to this graph:

This graph, built by Citizens for Tax Justice, shows that as a % of income, we all typically pay about the same share of taxes. For a time I couldn’t square the data. The report from the CBO didn’t seem to jive with the data coming from CTJ.

Then I realized my mistake. We’re talking about two different units. The CBO data that I was using was reporting share of tax revenue. The CTJ is using share of income. When I used the “back of an envelope” – I had too, the CTJ data is in 2011 numbers and the CBO data is in 2009. Further, I used the average of the quintiles and not the total population so my numbers may be off. However, if the details can be run, I’d be interested in seeing that. This is what I came up with:

Now we’re talking apples and apples. I broke out the quintiles in that weird way that folks do; listing the first 4 and then breaking down the last by the “nest 10”, “the next 5”, “the next 4” and “the top 1.” What this means is that if you gather than top quintile in one group you would see that they pay 93.93% of all taxes. And this is on an earning of 50.0% of all income.

Holy moly.

The top 20% of Americans earn 50% of the income and yet pay 94% of the taxes.

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Anyone who pays attention, and even a few of us who don’t, know that we are facing what the experts are calling “The Fiscal Cliff.” This is in reference to the set of economic or fiscal policies set to be enacted if nothing changes. That is, it is already law and will be implemented unless new laws are passed to change them. Key among this cliff are two main components:

(Reuters) – Allowing income tax rates to rise for wealthy Americans, and maintaining rates for the less affluent, would not hurt U.S. economic growth much in 2013, the Congressional Budget Office said on Thursday, stepping into a dispute between Republicans and Democrats over how to resolve the so-called “fiscal cliff.”

The report by the authoritative non-partisan arm of Congress is expected to fuel President Barack Obama’s demand for higher taxes on the rich, part of his proposal to avoid the full impact of the expiring tax cuts and across-the-board spending reductions set to begin in early 2013 unless Congress acts.

The narrative is that allowing Obama to follow through on the class warfare rhetoric wouldn’t really be that harmful to the economy; almost saying that any negative impact is worth it in order to restore “fairness.”

Extending all expiring tax provisions other than the cut in the payroll tax and indexing the AMT for inflation— except for allowing the expiration of lower tax rates on income above $250,000 for couples and $200,000 for single taxpayers—would boost real GDP by about 1¼ percent by the end of 2013. That effect is nearly as large as the effect of making all of those changes in law and extending the lower tax rates on higher incomes as well (which CBO estimates to be a little less than 1½ percent, as noted above), primarily because the budgetary impact would be nearly as large (and secondarily because the extension of lower tax rates on higher incomes would have a relatively small effect on output per dollar of budgetary cost).

So, by keeping the tax cuts for everyone under 250k we grow by 1.25%. But if we keep ALL tax cuts we grow by 1.5%. And the analysis is that the 1/4 point in GDP isn’t significant. Perhaps. But it represents 16.67% more growth than if we raise the taxes on the wealthy.

16.67 percent seems like a pretty big “get,” especially when the President is struggling as is.

But how about jobs:

The CBO said the tax hikes for the wealthy would reduce job growth by around 200,000 jobs…

For a President that is interested in growing jobs, he has a funny way of showing it.

So, what happens if we avoid the cliff?

Output would be greater and unemployment lower in the
next few years if some or all of the fiscal tightening scheduled
under current law—sometimes called the fiscal
cliff—was removed.

Nice.

But is that all?

However, CBO expects that even if
all of the fiscal tightening was eliminated, the economy would remain below its potential and the unemployment rate would remain higher than usual for some time. Moreover, if the fiscal tightening was removed and the policies that are currently in effect were kept in place indefinitely, a continued surge in federal debt during the rest of this decade and beyond would raise the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates) …

Yeah….that’s interesting, but what happens if we do nothing and just fall over the cliff?

…Moreover, if the fiscal tightening was removed and the policies that are currently in effect were kept in place indefinitely, a continued surge in federal debt during the rest of this decade and beyond would raise the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates) and would eventually reduce the nation’s output and income below what would occur if the fiscal tightening wasallowed to take place as currently set by law.

Not for nothing, but I think that reading ALL THE WAY to the second paragraph and reporting on the part of the report that kinda isn’t friendly to Obama is somewhat important.

Be that as it is, if it were me and I was the Speaker, I’d tell the Barackness Monster to go to hell, hold on and jump. We’d be better off.

After yesterday’s carnage in the stock market, strategists warned bouncing back wouldn’t be easy. Sure enough, today’s slide is starting to pick up some steam in early afternoon trading.

The Dow recently fell 93 points, or 0.7%, to 12840, which comes one day after the blue-chip index tumbled 312 points — the worst drop of the year — following President Obama’s reelection. Cisco Systems which reported its first monthly sales drop in nine years — and Home Depot are leading the declines, as lingering worries over the looming fiscal cliff are outweighing better-than-expected labor-market and export data.

The S&P 500 is down 0.9% to 1382 (so much for holding that psychologically important 1400 level). The tech-heavy Nasdaq Comp is off 0.8% at 2913 Apple Inc. shares are down nearly 3%, and have now fallen 22% in less than two months.

“The negative equity trade is building steam,” warns Andrew Brenner, global head of international fixed income at National Alliance. “Bonds are gaining traction as the world is becoming more negative on both Europe and the U.S.”